Philippine participation in CPTPP to benefit unskilled workers

MANILA, Philippines — Joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) could bring benefits to the country, particularly for unskilled workers, but may lead to lower economic growth as high value-added industries decline.

This is according to a policy note published by the Philippine Institute for Development Studies and written by Ateneo de Manila University economics professor Leonardo Lanzona Jr. and members of the ADMU Economics Department-International Trade Research Laboratory.

The study was conducted to determine the potential impact of CPTPP on the Philippines, which has expressed interest to join the trade deal in 2021.

Signed in March 2018, the CPTPP is a high standard free trade agreement composed of Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore and Vietnam.

“The Philippines’ participation in the CPTPP will benefit workers, especially the unskilled, by raising their employment and earnings as export diversification is achieved,” the authors said.

They said the benefits, however, come at a cost.

“The high-value-added industries favored by existing trade barriers will experience a loss, thus causing a decline in the country’s gross domestic product,” the authors said.

Should the Philippines join the CPTPP, they said metal, wearing and apparel, vegetables and fruits, wool, and leather sectors would have the highest increase in output.

On the other hand, those likely to experience losses are the rice and motor vehicle sectors.

“The gainers are sectors where the country seems to have a comparative advantage and where firms do not require relatively higher skills. The losing sectors are those where labor appears to be more intensive, but is not highly valued abroad,” the authors said.

Another disadvantage cited in the study is the greater trade deficit due to increased accessibility of more imports.

“The country can optimize the benefits of CPTPP if the government creates the necessary conditions to improve technology, minimize the costs of export diversification, and differentiate its exports from the rest of the world,” the authors said.